It was one of Europe's grimmest maritime oil spills, suffocating hundreds of miles of France's Atlantic coastline with a tide of black, toxic heavy fuel and killing or injuring 300,000 sea birds. Yesterday in a historic ruling, a Paris court held that the oil giant Total was responsible for the 1999 sinking of the ageing oil tanker Erika and must pay millions of euros in damages.

The ruling came after a seven-year investigation and complex trial that lifted the lid on the murky world of offshore-registered shipping.

Establishing a legal precedent that was cheered by environmentalists, the judge ruled that more than 100 groups, including bird protection associations, fishermen, sea-salt producers and oyster-farmers, had a right to compensation for the environmental damage caused. The ruling means polluters can be held accountable for damage to the natural world, as well as to business and economic interests.

Total, which chartered the rusting tanker that split into two off the Brittany coast, belching out a black toxic wave, was found guilty of negligence and fined €375,000 (£270,000). It was also ordered to pay a share of nearly €200m in damages to civil parties, including the French state. The Italian certification company that declared the vessel seaworthy, and the ship's owner and manager, were also held responsible.

"This is a first in France, it's historic," said Allain Bougrain-Dubourg, president of France's Bird Protection League, which was awarded €800,000 in damages.

In December 1999, the Erika, a rusting 24-year-old Maltese-registered tanker was chartered by Total to carry 30,800 tonnes of viscous heavy fuel oil to Italy. Four days after it set sail from Dunkirk, the vessel began to crack off the Pointe de Penmarc'h in Brittany. As the crew struggled with massive gashes that began appearing on the deck, the tanker eventually broke in half in high sea and winds. "The ship folded in two like a book closing," the captain recalled.

After the crew was rescued, the Erika slowly sank in the Bay of Biscay, some 40 miles off the French coast, leaking a huge oil slick of 20,000 tonnes of toxic fuel cargo into the sea. The oil started to wash ashore almost two weeks later, killing more than 150,000 birds. Locals described a coating of black goo "like thick chewing gum", sometimes 30cm (12in) thick on beaches. Seafood was banned, fishing was suspended and volunteers rushed to try to clean the birds that were suffocating in what environmentalists called a "black tide". Some cleaned beaches were blackened again overnight as fresh oil washed in.

The slick fouled 250 miles of coastline and crippled local industries, including sea-salt production, oyster-farming, fishing, hotels and tourism.

The court said Total, the world's fourth largest oil group, had failed to take into account the age of the ship and deficiencies in its maintenance. This carelessness had a "causal role in the sinking and, as such, provoked the accident", the judge said.

Yannick Jadot, campaigns director for Greenpeace France, told the Guardian: "We hope this will have a snowball effect in the world so that big groups will be held responsible for environmental damage." International maritime law should now be changed so large international companies that hired tankers would be fully held to account for their accidents at sea, Jadot said.

France's junior minister for ecology, Nathalie Kosciusko-Morizet, called the judgment a "revolutionary decision" that would clear up the murky area of who was responsible for disasters at sea.

The socialist Ségolène Royal, head of the coastal Poitou-Charentes region that was badly hit by the accident, said: "It is a very severe warning to careless transport groups, to the floating garbage cans that cross the seas, often in total impunity. It's a big legal step."

"This is the end of a battle we started 30 years ago: making the polluters pay for their damage," added Alphonse Arzel, 80, who led the fight for compensation after a Liberian supertanker, the Amoco Cadiz, sank off Brittany in 1978, dumping 230,000 tonnes of crude oil.

A lawyer for Total, Daniel Soulez-Larivière, said the court's ruling would surely "be popular and praised a lot. On the other hand, we have to see if it is just ... All the oil companies are going to have to get round a table to work out what the consequences are."

He said he would urge the company to appeal.

Total's lawyers argued during the trial that the Erika had an "undetectable flaw" in its hull and that the oil giant should not be held responsible for ensuring the security of tankers leased from another party. The company argued that it chartered the ship in good faith, relying on official documentation certifying it as seaworthy.

The trial lifted the lid on a murky world of offshore-registered tankers and labyrinthine ownership arrangements that made it difficult to establish responsibility for the disaster.

The French oil company was accused of marine pollution, of deliberately failing to take measures to prevent the pollution, and of complicity in endangering human life. It was acquitted of the last charge.

The judge also acquitted four employees of local maritime authorities, and the ship's Indian captain, Karun Mathur.

Backstory

Some 270,000 tonnes of waste, made up of fuel oil, seawater, sand and stones, had to be treated in the Erika cleanup operation. Tens of thousands of sea birds usually wintered on the affected stretch of Atlantic coast and vast damage was caused to shellfish farms and fishing

The stinking "black tide" from the spill hit the shore around Christmas, and in Britanny locals described how they initially rushed on to the beaches to clean up birds, wearing only household washing-up gloves.

Greenpeace France said yesterday that although after seven years the beaches were clean and the maritime flora and fauna was recovering, toxic substances would be present in the ecosystem food chain for a long time to come.

Before the ruling, Total had already spent some €200m on the cleanup operation, and it rejected suggestions that it should pay more. In February 2007, as the Erika trial started, the company announced record annual profits of €12bn

The French state has now been awarded more than €150m in damages to cover the clean-up costs and recovery of the wreckage.

Regional governments in the coastal areas of Brittany, Poitou-Charentes and Pays de la Loire were also awarded several million euros to compensate for the massive operation.